True or False
A time deposit account generally imposes and interest penalty when funds are withdrawn before maturity

True

True or False
"For Deposit Only" is an example of a restrictive endorsement?

True

True or False
As negotiable instruments, checks are governed by the legal requirements of Article 3 of the Uniform Commercial Code

True

True or False
The drawee initiates the check payment process by writing a check on his or her account at a bank.

False

True or False
The risk a teller assumes when cashing a check is the same as paying a check

False

What check fraud technique involves the opening of two or more checking accounts and drawing against nonexistent balances?

Kiting

True or False
When John gave an oral agreement to pay a debt of $300 to Dan's Landscaping, he created a negotiable instrument.

False

Which entity prints and begins the cash distribution process?

U.S. Treasury Bureau of Engraving and Printing.

Which of the following governs the check collection and return process?

Regulation 3

Which of the following requires depository institutions to make funds deposited into transaction accounts available for withdrawl on a set schedule?

Regulation CC

Which of the following, toward the end of the payment process, receives the check for payment?

The Drawee

A Bank that has been in operation for five years or less. Commerical banks operating for five years or less that convert to federal reserve membership are subject to the de novo bank application and supervision standards.

de novo bank

A business organization sharing with another organization some aspect of common ownership and control, such as interlocking directorates, stock ownership, or parent company

Affiliate

A business organization treated as a legal entity and owned by a group of shareholder (Stockholders). The shareholders elect the directors, who serve as the governing body managing the corporation's affairs.

Corporation

A communication system that permits the exchange of information necessary to carry out transfers of funds. The payment system extends from the point of acceptance to the paying bank.

Payment System

A document issued by a federal or state supervisory agency granting a bank the right to do business.

Charter

A formal set of guidelines approved by the board of directors that represents a company's policy for corporate governance and individual conduct.

Code of Coduct

A sales practice whereby a customer is invited to purchase additional products and services that are related to the product or service aquired.

Cross-selling

A check on which a material change, such as the dollar amount has been made.

Altered Check

A rate reflecting the total amount of interest paid on a deposit account, based on the interest rate and the frequency of compounding for a 365-day period.

Annual Percentage Yield

A plastic access card that enables the cardholder to withdraw cash through an ATM and that in some retail locations can be used for point-of-sale transactions after a personal identification number (PIN) is entered. The cost of the transaction is debited from the cardholder's bank account.

Debit Card

A clearing facility operating for the convenience of banks in a particular region, generally through the regional Federal Reserve Bank. An ACH electronically processes interbank credits and debits.

Automated Clearing House (ACH)

Currency issued by a bank promising to pay the amount of money designated on its face when the note is presented to the bank.

Banknote

An economy in which goods and services are traded for other goods and services. Typically no money is exchanged.

Barter Economy

The governing body of a corporation ultimately responsible for its financial performance, consisting of individual direcots elected by the shareholders.

Board of Directors

Using borrowed funds, plus some equity to buy assets such as stock.

Buying on Margin

(1) Money in the form of bills or coins; (2) Money on hand or in the bank.

Cash

A draft on an account in a bank that the owner of the account signs to direct the bank to pay a certain amount to the payee.

Check

A plastic access card that enables the cardholder to purchase goods or services or withdraw cash online through a point-of-sale terminal and offline upon signing a receipt. The transaction cost is debited from the cardholder's deposit account. The card, which may be used for ATM transactions as well, may carry a Visa or MasterCard logo.

Check debit card

A type of money in which the medium of exchange itself is a useful commodity.

Commodity money

A federal law mandating that the federal bank regulators regularly evaluate how financial institutions help meet the credit needs of their communities. Including low and moderate income individuals and families, and publicly rate the bank's performance.

Community Reinvestment Act

A situation in which an action taken by an individual in an official capacity may benefit that individual personally to the detriment of the employer.

Conflict of interest

The manner in which directors, management, and auditors handle their responsibilities to shareholders.

Corporate governance

A document filed with a bank that defines the authority given to the corporations officers and specifies who may sign checks, borrow on behalf of the corporation, and otherwise conduct business and issue instructions to the bank.

Corporate Resolution

A bank, often a larger bank, that maintains an account relationship or engages in an exchange of services with another, usually smaller, bank. Sometimes called upstream correspondent bank. The bank that uses the servies is the respondent bank.

Correspondent Bank

(n) A document, currency, or coin that is forged or otherwised created to look real and is inteded to pass for real; (v) The act of criminally forging a document, currency, or coin with the intent to profit from the act.

Counterfeit

A plastic card or its equivalent used by the holder to obtain money, goods, or servies, usually using an open-end line of credit established by the card issuer.

Credit Card

(1) A negative balance created in an account when payments made during business hours exceed incoming funds actually received; (2) an overdraft in a bank's reserve account at a Federal Reserve bank during business hours.

Daylight overdraft

(1) A decrease in prices that usually results from a decrease in total demand relative to the supply of available goods and services; (2) a decrease in the money supply that causes an increase in the value of money and a resulting reduction in prices.

Deflation

Funds that a customer may withdraw from a bank with no advance notice, usually by writing a check or using and ATM.

Demand deposit

The bank in which a check is first deposited. The bank also may be the paying bank (Drawee) if the check is drawn on, or payable at, or payable through the bank.

Depositary bank

A financial institution that obtains funds mainly from deposits by the public. This includes commercial banks, savings and loan associations, savings banks, and credit unions.

Depository Institution

A process by which funds are deposited electronically to bank accounts. Commonly used for payroll and Social Security payments.

The withdrawl of money from a financial institutionand deposit of the funds in another type of investment product outside the banking system in order to earn higher interest.

disintermediation

The banking system in the United States today in which a bank may be chartered by either a state or the federal government

Dual banking system

Commerce that is conducted electronically, for example through Web sites and the Internet.

E-Commerce

A country's system of production, distribution, and consumption.

Economy

Established under the Federal Reserve Act, a corporation that is a bank subsidiary for either foreign trade-related banking or foreign investment.

Edge Corporation

A system for electronic payment of government-sponsored benefit programs using plastic cards and point-of-sale (POS) technology.

Electronic Benefit Transfer (EBT)

An electronic version of a paper check that includes the date, payee name, payment amount, and signature. Checks bear a digital signatrure security code proving that payment was authorized by the account holder.

Electronic Check

A transfer of money from one bank account to another that is initiated through an electronic terminal, telephone, computer or magnatic tape.

Electronic Funds Transfer (EFT)

A signature (other than the signature of the maker, drawer, or acceptor) that is made on an instrument, such as a check, for negotiating the instrument, restricting payment, or transferring liability of the instrument to another party.

Endorsement

Principles of conduct and judgement that affect business practices.

Ethics

Funds immediately available to lend from reserve accounts at Federal Reserve banks. These generally are one-day loans from one bank to another. A bank buys (borrows) or sells (lends) federal funds. Also known as fed funds.

Federal Funds

The rate banks charge one another for overnight loans of reserve funds held at Federal Reserve banks. Also know as fed funds rate.

A daily publication of the federal government that contains, among other material, proposed and final regulations adopted by federal agencies.

Federal register

Electronic funds transfer network operated by the Federal Reserve banks. It is usually used to transfer large amounts of funds from one institution's account at the Federal Reserve to another intitutions account. It is also used by the U.S. Department of the Treasury, other federal agencies, and government-sponsored enterprises to collect and disburse funds. Also know as Fedwire.

Fedwire funds service

Money that is mandated by a government and backed by the law and power of the state.

Fiat Money

An individual, bank, or other party to whom specific property is turned over under the terms of a contract and who acts for the benefit of another party on a basis of trust and confidence.

Fiduciary

A financial institution that facilitates the exchange of funds between savers and spenders by taking in deposits from saves and then lending those funds to borrowers and investors.

Financial intermediary

The dollar amount of deposited cash items (checks) that have been given immediate provisional credit but have notnyet been collected from drawee banks. Also called uncollected funds.

Float

The total value of all goods and services sold during a specific period of time.

Gross domestic product (GDP)

A restriction on the payment of all or any part of the balance in an account.

Hold

A person who is in possession of a negotiable instrument and who is entitled to receive payment of the instrument.

Holder

A crime involving the possession of identifying information not lawfully issued for the possessor's use, or the attempt to access the financial resourses of another person through the use of illegally obtained indentifying information.

Identity theft

A persistent increase in the general level of prices of goods and services in an economy. It results from increases in total spending relative to the supply of goods in the market.

Inflation

Currency and coin declared b

Currency and coin declared by a government as accceptable payment for goods and services and for settling debts

Legal tender

An instrument issued by a bank at the request of a customer, generally a buyer of goods, that substitutes the credit of the bank for the credit of the buyer. The letter stipulates that the issuer will honor drafts or other demands for payment in compliance with the conditions specified in the letter.

Letter of Credit

(1) An amount owed; (2) a source of financing, such as a deposit in a bank; (3) a legal obligation to make good; (4) a loss or damage that results from an action or transaction.

Liability

(1) The ability to meet current obligations; (2) the quality that makes an asset quickly and readily convertible to cash without significant loss

Liquidity

A deposited check drawn on another bank in the same Federal Reserve Check processing region

Local check

Numbers printed in magnetic ink near the bottom of the front of a check to facilitate automated processing. The position and content of the MICR line are governedby industry standards. MICR encoding inclused the bank's rounting number, the customer's account number, and the number of the check, and often the amount of the check.

Magnetic Ink Character Recognition

The buying and selling by banks of unregistered securities and in companies

Merchant Banking

The management of a nation's money supply by a central bank, such as the Federal Reserve, to ensure the availability of credit in quantities and at interest rates consistent with specific economic objectives.

Monetary Policy

(1) Legal tender; (2) anything that serves as a generally accepted medium of exchange, a standard of value, a means for saving or storing purchasing power.

Money

The process by which banks expand the money supply by using their excess reserves to make loans, thereby increasing the amount of funds in checkable deposits.

Money creation

An economy in which access to good and services is based on the capacity to pay in money.

Money economy

A type of savings account created in 1982 that pays a market interest rate and gives account holders limited check-writing priviledges.

Money Market Deposit Account

The sum of all the funds consumers and businesses have immediately available for transactions and investments in the domestic economy. Also know as money stock

Money Supply

An unconditional written order or promise to pay a certain sum of money. The document mys be easily transferable from one party to another by endorsement and delivery or delivery alone. Every negotial instrument must meet all requirements of Article 3 of the Uniform Commercial Code.

Negotiable instrument

A deposited check that is drawn on another bank located in a different Federal Reserve check processing region. Also known as a transit check.

Non local check

An expression indicating that a check or item drawn against an account exceeds the amount of funds available in the account.

Nonsufficient funds (NSF)

A check deposited or otherwise negotiated at the bank on which it is drawn.

on-us check

The term adopted by NACHA - The electronic payment association to refer to the bank that receives payment instructions from the originator and then forwards those instructions (entries) to the automated clearing house (ACH) operator.

Originating depository financial institution (ODFI)

What does ODFI stand for?

Originating depository financial institution

What does RDFI stand for?

Receiving depository financial institution

A negative (minus) balance in a customer's checking account resulting from the paying (posting) of checks for an amount greater than the accounts available balance.

Overdraft

A legal agreement stating the contributions each partner will make to the business, the nature of the business, and the proportions in whcih each partner will share in profits or losses.

Partnership agreement

A document containing language certifying that the name of the partnership is exactly the same as the one provided to the bank and listing who is authorized to write checks and sign for loan on behal of the partnership.

Partnership Resolution

A terminal used to transfer funds from a bank account to a retailer to pay for purchases.

Point-of-sale (POS)

A bank service that pays a business's checks only if the match the check data on an electronic list of issued checks that the business sends to the bank.

Positive Pay

The person or company that appoints another (an agent) to act on his or her behalf.

Principle

The reserve patterns of banks before the Federal Reserve System was authorized. Smaller banks would place their recers in larger banks, which would then place their reserves and those of the other smaller bganks in money center banks such as those in New York City

Pyramided reserves

An automatic identification method that relies on storing and remotely retrieiving data using devices that can be attached to or incorporated into productws such as tags or transponders.

radio frequency indentification (RFID)

What does RFID stand for?

Radio Frequency Identification

The term adopted by NACHA - the Electronics Payments Association to refer to the bank that receives automated clearing house (ACH) entries from the ACH operator and then posts them (either credits or debits) to the accounts of its depositors, the receivers.

Receiving depository financial institution

A period of significiant economic slowdown, often defined as a decline in the gross domestic product over two or more consecutive quarters.

recession

An official rule or set of rules having the force of law. Regulations are issued by government agencies and are based on, and designed to implement a law enacted by legislature.

regulation

A service that allows consumers or businesses to scan checks and transmit the scanned images or automated clearing house data in an encrypted form to a bank for posting and clearing.

remote deposit capture

What does RDI stand for?

Remote deposit capture

Token coins or certificates that are not intrinsically valuable but can be exchanged for a fixed quantity of a commodity such as gold or siver held in a central depository.

Representative money

A portion of the funds (vault cash, deposits in a non interest bearing reservve account at a Federal Reserve bank, or deposits in a pass-though account at a correspndent bank) that the Federal Reserve require banks to set asise as a reserve against specified deposit liabilities.

Reserve Requirement

The right of surviving tenants to take full possession of specific assets, such as account funds, upon death of other tenants, without establishing an estate but subject to state laws.

right of survivorship

A federal law intended to improve the governance of public corporations by holding boards of directors, management and auditors to high standards of conduct and accountability.

Sarbanes-Oxley Act

The conclusion of a transaction, including completing all necessary documentation and making the necessary payments; the point at which claims and obligations are satisfied.

settlement

A bill payment device offered by some credit unions. Members of a credit union can write these check-like instruments against their savings share accounts.

share draft

An order by a depositor to the bank (the drawee) to not pay a previously issued check or item.

stop payment

A paper reproduction of the orginal check drawn from an electronic file that contains an image of the front and back. It bears the full MICR line as allowed by industry standards for such checks, conforms in paper stock and dimensions to the standards, and can be processed through automated check systems.

Substitute check

A transaction account that is interest bearing and offers a higher interest rate than a NOW account, but less than a money market deposit account. As a transaction account, it is subject to reserve requirements and has no limit on monthly transaction volume.

super NOW account

A checking or similar account from which transfers can be make to third parties. Demand deposit accounts, negotiable order of withdrawl (NOW) accounts, automatic transfer service (ATS) accounts, and credit union share draft accounts are examples of transaction accounts at banks and other depository institutions.

Transaction account

An account in which tax deposits may be made through any authorized depository bank, where the deposits remain until the Treasury draws them out according to a predetermined schedule.

Treasury Tax and Loan Account (TT&L)

What is a TT&L account

Treasury Tax and Loan Account

A set of laws adopted by states to govern commercial and financial transactions between parties. Many states add their own amendments to the basic code.

Uniform Commercial Code

A standard of measurement for the relative worth (value) of goods and services.

Unit of account

The act of charging a higher rate of interest than is allowed by state law.

usury

An employee who reports alleged wrongdoing by an employer or other employee to legal or regulatory authorities and who is commonly vested by statute with rights and remedies for retailiation.

whistleblower

Failure of the drawee (paying bank) to pay a properly payable check.

Wrongful dishonor

Drawee

Paying Bank

Drawer

The maker of a check

True or False
A debit cardholder is normally billed at the end of the month.

False

Banking done on a wireless device is known as

Mobile Banking

True or false
EBPP is an electronic payment system that allows recipients of government benefits to access their benefits from accounts established by the government at designated firms

False

True or False
Fedwire and CHIPS are the two major wholesale EFT systems that banks use to borrow from each other.

True

True or False
Most consumers in the 18 to 34 year age group do their banking with a wireless device.

False

True or False
Radio frequency identification (RFID) is the technology used to support contactless payments.

True

What federal law provides legal support for e-commerce agreements?

E-Sign Act

Which of the following is a bank-owned system for clearing payments in the international dollar market?

CHIPS

What service can consumers use to directly purchase securities issued by federal agencies?

Treasury Direct

How do banks contribute to their communities?

By providing deposit and credit services to individuals and businesses as well as contibuting time, talent and funds to build restore and enrich their communities.

What are non traditional bank services?

Insurance and Securities

What is the Gramm-Leach-Bliley Act?

The GLBA authorized financial holding companies so that banks and other businesses could engage in a broad array of finance related activities. The GLBA also gives customers the right to instruct bank not to share their personal information with nonaffiliated third parties. It also requires financial institutions to establish a privacy policy and disclose the policy to customers when they open accounts and annually thereafter.

Who is ultimately responsible for the financial performance of the bank.

The board of directors

What are the benefits of banking partners and outsourcing relationships.

Banks fund loans, offer financial sercies to consumers and businesses, provide access to the payment system, create money, help expand and contract the money supply and are a force for economic and social change.

What is inflation.

Inflation is a continuing increase in prices in an economy caused by too much currency and too few goods available for purchase.

Why is the National Bank Act of 1863 important?

The National Bank Act founded the dual banking system. Its four major provisions created National banks, established the Office of the Comptroller of the Currency, introduced the national banknote and established a system of required reserves.

What is meant by the Dual Banking System?

Banks may be either state government or federal government.

What was the singular achievement of the Federal Reserve Act of 1913?

The Federal Deposit Insurance Corporation (FDIC) was created to insure depositors' funds at FDIC-insured banks.

Why might banks consider acquiring or merging with another bank?

Through mergers and acquistions, some banks are eliminating duplication of efforts and becoming more profitable. Banks also combine forces as a way of entering new geographic areas to expand their market share.

What are some trends in banking today?

Trends in banking include an ongoing evolution in the regulation of financial services that banks offer; continued expansion of the financial services offered to customers; innovations in technology for the product delivery and operations; more intense competition in financial services; narrowing margins between fund costs and earnings; and global expansion.

What legislation stipulates that a banks customer's financial records will be kept private?

The Gramm-Leach-Bliley Act

What five regulatory groups have the authority to supervise bank activities?

The Office of the Comptroller of the Currency

Federal Reserve Board

The Federal Deposit Insurance Corporation

State Banking Departments

Office of the Thrift Supervision

What does OCC stand for?

Office of the Comptroller of the Currency

What does FDIC stand for?

Federal Deposit Insurance Corporation

What does OTS stand for?

Office of Thrift Supervision

How do the properties of money reinforce the basic function of money?

Money's most basic function is to serve as a medium of exchange that is generally accepted for goods and services. Money also serves as a unit of account, a standard for determining the value of goods and services, and as a store of value-a means of accumulating the power to purchase goods and services in the future. These functions are reinforced by the the properties of money: an item must be accepted generally as a medium of exchange, divisible without loss of value, relatively scare and in controlled supply, stable in value, and portable.

What is the difference between a barter economy and a money economy?

In a barter economy, certain goods and services are accepted in exchange for other goods and services based on the mutual needs of the parties to the transaction. In a Money economy, coins and currency the the government has declared to be legal tender, are used to buy goods and services.

When a nation is in a recession, what would be the expected implications for consumer spending, disposable income, gross domestic product (GDP), housing starts, and the unemployement rate?

A recession is a significant decline in the nation's economic activity for a prolonged period of time. During a recession, a nation's GDP declines and more and more consumers curtail their spending. With fewer consumers to buy goods, business produce less and thus spend less. Lower spending means more layoffs causing unemployment to rise. As fewer people are working, fewer people are able to afford houses which leads to a decline in housing starts.

If there were no reserve requirements, could banks create an infinite amount of demand deposits?

In theory yes, If a bank were not subject ro reserve requirements, it could make new loans and credit demand deposits using every dollar it holds. However when the proceeds of these new loans are disbursed and the loan funds are transferred through the check collection process, the bank would lose a dollar in cash for every dollar it created. Thus, in reality, the answer is no. Apart from the legal requirement to hold reserves, banks need to hold a percentage of their assiets as cash or on deposit with other banks to meet cash withdrawls and pay the claims of other banks presenting depositor's checks for collection.

How does money flow in the economy?

Consumers, businesses, and governments supply each other with factors of production in the form of land, labor, capital, and talent. In turn, these forms of income are spent to bou the goods and services they helped produce. Consumer spending depends on the wants and needs of individuals and families, such as food, health, and eduction. Business spending is directed toward a return of profit, for example, by investing in more employees and training them or replacing old machines with ones that are more efficient. Governments have a variety of social and other public objectives, such as education, public safety, and defense. In many ways, savings represent a leakage from the circular flow of economic activity because they are not used immediately to buy goods and services or to generate income. If savings were kept out of circulation, the economic consequences could be devasting. Because savings usually are deposited in financial institutions, however, they are pumped back into the economy in the form of loans.

What is the difference between M1 and M2?

M1 is the narrowest measure of money. It counts all mediums of exchange, principally cash, demand deposits, and interest-earning checkable deposits at banks and savings institutions. M2 Incorporates all the items counted in M1 and adds the different types of near money that are close substitutes for money, most notably, time and savings deposits at banks and savings institutions.

How does the Federal Reserve manage the money supply?

The Federal Reserve manages the quantity of money in circulation to ensure that credit is available in the amounts and at interest rates consistent with specific economic objectives. The methods the Federal Reserve uses to manage the money supply include reserve requirements, discount operations, and, most important, open market operations managed on its behalf by the Federal Open Market Committee and implemented by the Federal Reserve Bank of New York.

Why does the Federal Reserve need to manage the money supply?

A nation's money supply is the sum of all the funds individuals and businesses have immediately available for spending in the domestic economy. Careful management is necessary to ensure that the money supply does not grow too fast and result in inflation, or too slowly and result in a recession. To ensure that the deposits banks create are not too much or too little for the needs of the economy, the Federal Reserve controls the amount and cost of reserves available to banks. It buys and sells government securities in the open market, raises and lowers the amount of reserves banks must hold, and set the target federal funds rate that banks use when they lend to each other. These actions in turn become the basis for the interest rate banks offer their customers on both loans and deposits.

What are three types of money that developed over time?

Commodity Money was one of the first types of money. It is a medium of exchange whose value comes from the useful thing of which it is made. Some examples include metal such as iron nails, red ochre in Swaziland or salt in Ethiopia.

Representative Money consists of token coins or certificates that can be exchanged for a fixed quanity of a commodity. Examples are coins made of precious metals such as gold or silver or receipts that represent metal bricks or bags of precious metals held in safekeeping in a central depository.

Fiat Money is money that has little or no intrinsic value as a commodity and is usually in the form of tokens or pieces of paper. It is not redeemable for a commodity, but its value is mandated by a government and backed by law and power of the state. Examples would be coin and currency currently used in most countries around the world, such as the U.S. one cent penny and dollar bill.

What are some alternatives to coin and currency that are used in the United States? Which types are becoming less popular and which are more common today?

Alternatives to coin and currency include checks, credit cards, debit cards, stored value cards, and electronic transfers. Electronic transfers include those made using credit or debit cards through automated teller machines, (ATMs) point-of-sale (POS) devices; Fedwire funds services; automated clearing house (ACH) transfers such as payroll deposits or Social Security payments; and online (internet) payments such as those consumers make to utility companies. In light of the proliferation of different electronic applications and devices to effect money transfers and payments, paper checks are becoming less popular.

Why are deposits important to banks?

Deposits from checking, savings, and money market deposit accounts and certificates of deposit provide a majority of the funds banks use to lend and invest.

What are the basic differences and similarities between checking accounts and a savings account?

Checking accounts are transaction accounts. Deposits made to noninterest earning checking accounts are payable on demand. Ususally the customer intends to withdraw checking account funds in the near future to pay bills and meet expenses. Checking accounts also may pay interest. Such accounts are known as negotiable order of withdrawl or NOW accounts.

Customers generally place funds in savings accounts to set aside money for future needs and to earn interest. Technically speaking, savings account funds are not immediately available to the depositor. Although banks rarely do so, they can require a seven day notice of withdrawl from the savings account.

Checking accounts and savings accounts do not have a maturity dates. Deposits and withdrawls can be made on any day. Thus, unline a time deposit account, such as a certificate of deposit, no interest penalty is imposed for withdrawl from a checking or savings account. Also, under Federal Reserve Regulation D, transaction account deposits are subject to reserve requirement, Savings accounts are not.

How do automatic transfer services benefit a customer?

With automatic transfer service (ATS), customers can write checks that exceed their checking account balances, and the bank by prior arrangement (preauthorization) will move funds automatically from their savings account to cover the checks.

What deposit account would you recommend to a customer who wants to earn interest and would like the option of writing a small number of checks (no more than six) every month?

A money market deposit account offers higher annual percentage yields than savings accounts. This account also allows a limited number of monthly check and other preauthorized transfers to third parties (six per month). Withdrawls made in person are unlimited.

How can customers make deposits into their account without going to the bank?

How do account transactions differ for joint accounts held in joint tenancy versus those held as tenants in common?

With a join tenancy with rights of survivorship account, each account holder may make transactions, and only one signature is required. When one account dies, the funds in the account typically pass to the surviving account holders in accordance with state law and without need to establish an estate.

Tenancy-in-common accounts require the signature of all account holders for transactions. From the bank's perspective, tenancy-in-common accounts need more monitoring. If the bank pays checks with only one signature when it has agreed to require the signatures of all the account holders, it could be liable to those account holders who did not sign.

Upon the death of one account holder, the remaining holder is entitled only to his or her share in the account. The decendent's share may be inherited by a third party. Most banks require joint acounts to be established as joint tenancy with full right of survivorship.

When a deposit account is opened, why is it important for a bank to establish the authority of the customer to use the account? What three steps does the bank take to accomplish this?

When an account is opened, the bank enters into a contractual relationship that gives customers the ability to extend credit themselves, gives them a means to convert checks and other instruments into cash, and creates other situations tht could result in a loss to the bank. Three steps the bank takes to open an account are to 1.)